Taming the Money Sharks: 8 Super-Easy Stock Investment Maxims

Chapter 1

Stop the Bleeding

Should You Continue to Invest by Striking While the Iron Is Hot?

Don’t chase after any hot asset; first learn why it is hot.

Why do we chase after a hot asset? Please note that a hot asset (or a hot stock) can simply be any asset popularized by the media or any information channels. The story is the same: a newly developed, highly profitable investment opportunity appears, and if the investor does not act immediately, the opportunity will be gone.

This simple answer is just human nature.

We don’t want to be dummies and get left behind. Besides, all the “smart people” are already in it. This is a powerful motivation for us to jump in on a hot stock or asset. Often, it is mentally satisfying to join the “winners.”

It is always tempting to chase after a hot asset as a result of sheer emotion. None of us wants to be left behind in a hot cycle when a lot of money can be made by simply going with the trend. As the momentum keeps escalating the prices, the quick profits (even on paper) are instantly gratifying.

A. Chasing a Hot Stock

When a hot stock price begins to jump, we may also rationalize that even if we lose money, we are not to be blamed; we are simply “unlucky” as a group. That is such a human impulse, yet the fact is that investors still can lose a lot of money, unwisely at that, if they do not truly understand the reasons behind the price increase. ...